Border VAT number: self-employed in Switzerland

Context

In brief

• New Cross-Border Agreement from 1 January 2024: allowances €7,500 (old) or €10,000 (new)
• Withholding tax deducted ONLY in Switzerland; Italy recognizes tax credit
• Self-employed: AVS 5.3%, AI/IPG 5.3%, LPP 7-18% by age group
• LAMal mandatory; cross-border workers G have the right to choose between Switzerland and Italy

Key facts

• What: Opening a self-employed activity as a cross-border worker in Switzerland
• When: From 1 January 2024 (New Cross-Border Agreement in force)
• Where: Canton Ticino and Italian-Swiss border
• Who: Cross-border workers with a valid Permit G
• Amount: Allowance €7,500 (old) or €10,000 (new)
• Rate: Withholding tax deducted by Switzerland
• Contributions: AVS/AI/IPG 5.3%, LPP 7-18% according to age

Opening a VAT number as a cross-border worker in Switzerland requires understanding cross-border taxation, mandatory social security, and insurance obligations. The New Cross-Border Agreement, which came into force on 1 January 2024, has introduced significant changes for those residing in Italy and working self-employed in Switzerland. The distinction between "old" cross-border workers (already such before 17 July 2023) and "new" affects allowances and tax management directly.

Self-employed work vs. employed work for cross-border workers

The decision to become self-employed in Switzerland entails administrative and tax responsibilities different from employed work. An employed cross-border worker has the withholding tax deducted directly from the salary by the Swiss employer; a self-employed person, however, must manage the obligations towards the Swiss and Italian authorities autonomously.

In the self-employed work regime in Switzerland, the cross-border worker does not have an "employer" who pays the withholding tax. However, the Convention between Italy and Switzerland of 9 March 1976, integrated by the New Agreement of 23 December 2020 (in force 1 January 2024), establishes that the withholding tax remains deducted exclusively in Switzerland. Italy, to avoid double taxation, recognizes a tax credit (quadro CE of the 730) on those incomes.

Basic requirements to open a VAT number in Switzerland

For a cross-border worker residing in Italy (Canton Ticino or border provinces) who wants to work self-employed in Switzerland, the following are necessary:

1. Valid Permit G – The cross-border permit allows self-employed work in Switzerland for a maximum duration of five years, renewable. 2. Registration with the cantonal statistical office – Each Swiss canton requires the registration of a self-employed activity with the Cantonal Statistical Office (USTAT, or equivalent body). 3. Swiss federal taxpayer number – Necessary to pay social security contributions (AVS, AI, IPG) and declare income to the Federal Tax Administration (FTA/ESTV). 4. Registration with the Italian INPS – To manage the Italian social security position (if applicable for cross-border workers in transitional regime).

The New Cross-Border Agreement distinguishes between old and new cross-border workers regarding the income allowance for self-employed work. Old cross-border workers (already cross-border workers before 17 July 2023) benefit from an annual allowance of €7,500 in the absence of payments received from an employer. New cross-border workers (from 17 July 2023 onwards) enjoy a higher allowance of €10,000. Beyond these amounts, income is subject to the ordinary tax regime.

Operational details

Swiss taxation for self-employed border workers

For a border freelancer, Swiss taxation consists of three levels: federal, cantonal and municipal. Federal income tax is collected directly from the Federal Tax Administration (AFC/ESTV) and is calculated progressively. The Canton of Ticino applies additional cantonal and municipal rates, which vary depending on the municipality in which the activity is carried out.

The central element for the autonomous border crossing is the tax at source. Unlike employee work (where the employer pays the withholding tax on salary), the self-employed person must make quarterly or annual payments. However, Switzerland and Italy have agreed that this tax remains withheld exclusively in Switzerland. Italy recognizes the tax credit in the tax return (EC framework of declaration 730 for border workers who also declare in Italy). It is advisable to use the tax calculator to simulate the impact of contributions on the net paycheck.

Italy-Switzerland double taxation agreement

The Convention between Italy and Switzerland, signed on 9 March 1976, provides that income from self-employment carried out in Swiss territory is to be taxed exclusively by Switzerland. This means that:

1. Switzerland taxes the income of the self-employed (tax at source + income tax) 2. Italy DOES NOT tax the same income again 3. The border worker who resides in Italy and earns in Switzerland

Useful planning tools

To estimate your pension strategy, use the pension planner and the pillar 3 simulator.

Key points

Health insurance (LAMal) and supplementary pension schemes

One of the lesser-known but crucial aspects for the self-employed cross-border worker is health insurance (LAMal, or mandatory basic insurance). Switzerland requires that all residents and workers be enrolled in private health insurance. However, cross-border workers (Permit G) have an option: they can remain enrolled in the Italian insurance system or switch to a Swiss insurance fund.

Many cross-border workers choose to stay in the Italian system (SSN), paying a contribution to the INPS. Those who enroll in Swiss insurance must choose a private fund and pay the monthly premium directly. Swiss deductibles for adults range from CHF 300 to CHF 2,500 depending on the chosen coverage model.

For the third pillar (3a), the self-employed cross-border worker can make voluntary supplementary pension contributions. The annual maximum is defined by Swiss federal legislation and depends on whether the self-employed worker is enrolled in an LPP. Consult the AVS and LPP guide to better understand the pension options.

Practical procedure: step by step

Step 1: Verify cross-border status and register with the competent canton. Request the Permit G from the migration authorities of your Italian province of residence (police headquarters or prefecture). The permit is valid for 5 years.

Step 2: Register with the competent cantonal office. Once you have the Permit G, register your self-employed activity with the cantonal statistical office (USTAT or equivalent). Contact the canton office directly where you will carry out your activity.

Step 3: Obtain the federal taxpayer number and Swiss VAT identification number. The AFC/ESTV will assign a unique federal taxpayer number (UID). If you make VAT transactions, request the UID-VAT number from the same administration.

Step 4: Payment of pension contributions. Register with an AVS compensation organization for the payment of AVS/AI/IPG contributions. For the LPP, a registered cantonal pension fund will proceed with the collection.

Step 5: Health insurance. If you choose to remain in the Italian system, notify your INPS fund of the change in status (from employee to self-employed cross-border worker). If you opt for a Swiss fund, choose a private fund in the canton and enroll directly.

Step 6: Annual tax declaration in Switzerland. By the deadline set by the canton (usually late February or late March of the following year), submit the Swiss tax return to the AFC/ESTV. Attach income and business expense documents.

Step 7: Tax declaration in Italy. Even if self-employed in Switzerland, if you are a resident in Italy, you must declare your Swiss income to the Italian Revenue Agency (model 730 or personal income tax). In the CE section, request the tax credit for taxes paid in Switzerland.

For a personalized simulation of your tax situation, use the cross-border tax calculator available on Frontaliere Ticino. You will immediately receive an estimate of your annual net income and deductions according to your income bracket.